🗿 Is AI Funding Out of Control?

Over $35billion has been invested in AI startups globally this year

September 10, 2024

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GM. Happy Tuesday. Apple announced this year’s iPhone and shot a Weeknd music video with it. Apparently it’s designed with AI in mind, but we can’t imagine it’s too different from last year. 

It’s been a long year of AI news. Today we’re following the money, and making some projections about what these crazy funding rounds actually mean for the future. 

Without Further Ado. ☕ *knuckle cracks* ☕ Let’s get into it.

AI’s Unlimited Funding 

2024 has seen piles and piles of cash flowing into AI, particularly in the US. Some said funding would slow down this year but that just doesn’t seem to be happening, and we are skeptical of. Let’s take a look. 

The numbers

  • In the first half of 2024, over $35billion has been invested in AI startups globally, compared with around $79billion invested in all startups. 

  • 35 US AI startups have raised $100M or more in 2024

  • Five of the six venture rounds of more than $1 billion raised in the first half of 2024 were raised by AI companies

Do all these companies really have a chance?

Of course not. But that doesn’t really matter. If 1 of these AI plays work, that’ll make up for all the failures in the VC’s eyes. According to Pitchbook, VC returns are at a 10-year low. So it would be safe to say that they have big hopes for the AI market to correct that trend. 

But what about macro impacts? As more companies are funded the market is becoming increasingly saturated. With more and more money coming in, the barrier to entry will keep going up, stifling innovation from the little guys. An influx of capital like this can also lead to a bubble, think dot-com era. 

What does this mean for me?

Right now it might not mean much. A few weeks ago we talked about how brands have been overestimating consumer interest in AI. If you missed it, a study published in the Journal of Hospitality Market and Management found consumers were less interested in purchasing an item if it was labeled with the term “AI.”

Having said that, money talks. All of these companies with $100m funding rounds aren’t just going to disappear because we might use AI a little bit less than we thought. Maybe the true use cases will not be in consumer facing products at all. That doesn’t mean AI won’t have a significant effect on your life.

A question no one seems to be asking

AI is undoubtedly very cool and very useful. But, not everything needs AI. Talent and innovation follow the money. And there are only so many resources to go around. So if too much money keeps going into AI, how will that change the path of other startup ecosystems? 

Only time will tell. 

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